Yarra Trams, itself a joint venture of Transdev and Transfield Services, has been the sole operator of the city's extensive light rail network since 2004.

'One company failed to meet the stringent criteria we established for the tender and following the evaluation process and subsequent clarification of their submission, they decided not to continue to the next stage,' explained Transport Minister Lynne Kosky.

The Department of Transport is managing the re-franchising process for both the tram and suburban rail operations. A total of six companies have expressed an interest in the suburban operation, where Connex Melbourne is the current franchisee.

A shortlist of successful candidates was due to be issued by the end of August. The new franchises are due to commence in December 2009.